Logistics Lowdown - November 2016

We give you the skinny in the big bad world of logistics. Read this curated collection of articles every month to learn about the latest developments and most pressing problems facing our fast-changing industry.

1.

THERE WILL BE OCEAN FREIGHT RATE VOLATILITY IN 2017

The three alliances (2M, Ocean, THE) that dominate the container shipping industry are very closely matched in capacity on the two most significant trade routes, Asia-Europe and trans-Pacific. Due to this dynamic, Alphaliner forecasts that keen competition for market share between these alliances will fuel volatile freight rates in 2017 – similar to the cutthroat price competition that defined the first half of 2016.

2.

STATE AID UNDERMINING SHIPPING INDUSTRY RECOVERY?

Taiwan recently approved at $1.9 billion aid package to help out the country’s major container shipping lines, including Evergreen and Yang Ming. This wouldn’t be the first time a state has offered assistance to shipping companies to help them weather tough financial stress. Look no further than China, which has given out $1.75 billion to Cosco Shipping and China Shipping between 2009 and 2015. Or Germany and France’s loans and investment in Hapag Lloyd and CMA CGM. Industry analysts say all of this state aid will prolong the survival of weak players and delay the much needed restructuring of the shipping industry.

3.

WHY ARE SPOT TRUCKLOADS RATES RISING?

The DAT Freight Index rose 27% year-over-year in October. Flatbed rates increased 11% from September while dry-van and refrigerated volumes dipped slightly, but rose in comparison to 2016. There could be several reasons for the gain, including: large carriers cutting capacity, the resurgence of activity in the Southeast after the disruption caused by Hurricane Matthew, an above average fall harvest, and the rush move delayed cargo out of the West Coast ports after Hanjin’s collapse. On top of all these factors, the rise of e-commerce has lengthened peak freight season from September/October to January as customers redeem gift cards and retailers continue to move their products to distribution centers.

4.

PHILIPPINES WILL BUILD A SECOND PORT AT CEBU

The Philippines has recently approved a plan to construct a second container port in Cebu at a cost of $186 million. Funded jointly by the Philippine government and South Korean government, construction will begin in the third quarter of 2017. It will be located 5 miles from the current Cebu Port Authority, in an area with a deeper harbor. Set to open in 2020, the 500,000 TEU capacity port will focus exclusively on the container trade.

5.

LA/LB PORTS CONSIDER ALTERNATIVES TO PIERPASS

The Ports of Los Angeles and Long Beach are reviewing the success of PierPass, a program that diverts about half of truck traffic at the port to night and weekend hours by charging cargo owners a fee for using regular hours. Three alternative plans are under consideration: 1) dynamic and variable pricing depending on how congested terminals are, 2) a “peel off” system in which cargo owners will inform the carrier what day of the week they would like to pick up the container, and whether it will be during peak hour, 3) charging a lower flat fee but requiring appointment for all truckers.

The Ports of Los Angeles and Long Beach are reviewing the success of PierPass, a program that diverts about half of truck traffic at the port to night and weekend hours by charging cargo owners a fee for using regular hours. Three alternative plans are under consideration: 1) dynamic and variable pricing depending on how congested terminals are, 2) a “peel off” system in which cargo owners will inform the carrier what day of the week they would like to pick up the container, and whether it will be during peak hour, 3) charging a lower flat fee but requiring appointment for all truckers.